Tapped out... Too much investment pain. WWE stock dropped 16% Thursday after its 3rd quarter earnings revealed serious injuries to its pro wrestling business model:
- Sales rose just 1%, profits got erased by 2/3, and bodyslams doubled. That last part wasn't real (we were acting).
WWE runs a good, clean operation... with 3 business lines: Media/TV, live events, and consumer products (picture action figures and t-shirts). Its media division gets most of the love from investors, bringing in about 78% of total revenues. WWE does TV HBO-style — cable and streaming (plus pay-per-view):
- TV: Like HBO, you can watch WWE Smackdown on cable through its deal with Fox.
- Streaming: Like HBO Now (and soon "HBO Max"), WWE will happily collect your $9.99/month in return for streaming access to Stone Cold Steve Austin and the Undertaker. But subscriber numbers dipped 9% to 1.5M.
The main issue is Saudi Arabia... WWE actually hosted the 1st ever wrestling match last night in Saudi Arabia featuring women. But its TV deal in the Middle East and North Africa is delayed — and some analysts think it's never happening. Adding that entire geography would've brought a lot of revenue at little extra cost to WWE (the matches are already happening — feeding video to Egypt doesn't cost that much). Investors crave those easy extra profits, but aren't sure they'll happen.